Can You Rely on Public Service Loan Forgiveness?

My friend Catherine works at a non-profit in DC, providing therapy to middle school kids with special needs. She recently expressed her burden of paying off her student loans. I told her to look into the Public Service Loan Forgiveness program. It was great to hear that she already knew about it. But I was surprised that she refuses to enroll because she didn’t trust that the government would honor their word.

The Public Service Loan Forgiveness Program

The Public Service Loan Forgiveness Program (PSLF) was created just over 10 years ago and signed into law by President George W. Bush. The program allows federal student loan borrowers to have their federal student debt forgiven after 10 years of working for either the government or a 501(c)(3) non-profit.

The first batch among a total of 670,000 public service employees who are registered under PSLF will prepare to apply for forgiveness soon. And we shall see if the Trump administration will honor that promise!

Why Many Are Scared of PSLF

Many Americans who are currently enrolled in PSLF are very anxious. They fear that the Trump Administration will not honor the program, leaving them back to square one. Their fear is not unfounded.

In 2016, the Department of Education refused to honor loan forgiveness commitments it made (under PSLF) to four individuals who have dedicated their careers to public service. Jamie Rudert served aging Vietnam-era veterans with disabilities and their families. Michelle Quintero-Millan provided legal services to unaccompanied immigrant minors on the U.S.-Mexico border. Geoffrey Burkhart worked to improve public defender systems in the United States. Kate Voigt educated the public about crucial issues facing immigrants in this country.

All of them were initially told that they qualified for the PSLF program because they were working for non-profits. However, in 2016, they were told that they didn't actually qualify because they weren't working for 501(c)3 non-profits. The American Bar Association has filed a law suit against the U.S. Department of Education in behalf of these plaintiffs.

GOP’s Plans to Eliminate Student Loan Forgiveness

On December 1, 2017, while the GOP tax cut bill dominated the headlines, House Republicans introduced a bill called the PROSPER Act. It would dramatically alter higher education funding in America.

The bill would eliminate all of the existing student loan repayment programs and leave two in their place. One would be the standard 10-year repayment plan. The other would be an Income Based Repayment (IBR) Plan that required borrowers to pay 15% of their discretionary income towards their loans. However, borrowers would never be able to achieve forgiveness on this new IBR plan. Instead, the loan would be paid off once the borrower had paid the same amount they would have spent on the 10-year repayment plan.

Essentially, this bill would eliminate the student loan forgiveness program.

However, these changes would apply only to future borrowers. The bill would grandfather in current student loan borrowers. This means that even if the PSLF program was eliminated, current student loan borrowers could still eventually have their loans forgiven.

What Can You Do?

  1. Contact your representatives in Congress to let them know what you think about the PROSPER Act bill.

  2. If you are already on an income-based repayment and are counting on loan forgiveness, complete the PSLF Employment Certification Form, and submit to them to the Department of Education. This will help ensure you are making qualified payments.

  3. Work with a credentialed financial planner who has experience navigating the complex student loan debt environment.

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